Will I ever get paid?
When you are just starting out as an independent or as a brand new start-up business one of the most difficult challenges you face is getting your customers to pay you. This can be an acute problem for people who are providing services (rather than selling goods) because every sale – and therefore the price for every sale – is different. Very often the reason why it’s difficult to get customers to pay for your services doesn’t lie with the customers, but with you. It’s not because they don’t like your work, or don’t want to pay, it’s because you don’t know how to ask.
Overcome your fear
When I started out as a one-person business I was pretty confident that I could provide a service that was as good as anyone else’s. I knew my areas of expertise, I knew how to estimate how much effort a job would take, and I knew very well what my competitors were charging. But like many people just starting out in business, I was a little bit scared of asking for money. What if the customer said “No”?
This sort of fear is quite common, and isn’t surprising. Many people who start their own business do so to follow their passions rather than to make money. Many people can’t shake off the feeling that dealing with money is some sort of necessary evil, rather than recognising that it is an essential part of being in business. The truth is that if you don’t respect yourself no-one else will, and being confident enough to ask your customers to pay up is nothing more than self-respect.
Overcome your embarrassment
As well as fear, many new business people feel embarrassed to ask for money. If you’ve worked as an employee, you may have been told not to discuss your salary with your fellow employees. Or perhaps you feel that any talk about money is too private and personal, so it is a difficult for you to tackle. That sort of embarrassment has no place in business.
Define your terms of business
As a person new to business you have to realise that you and your business are separate entities. (Whether your business is a separate legal entity from you is a different question and depends on the type of business structure you choose, which is beyond the scope of this article.) Joan Smith may be embarrassed to talk about money, but Joan Smith Web Design should be happy to do so.
Your business should have its own Terms of Business which you share with all your customers and potential customers. If you are selling goods then your basic terms of business are pretty obvious to both buyer and seller. The buyer pays you, and you, the seller, provides the goods. But even here, you need to be careful. What about returned goods? What about warranties or servicing? Whatever you’d like your relationship with your customers to be, you need to describe it explicitly in your terms of business.
If you’re providing a service then setting out your terms in advance is even more important. Do you want to be paid by the day or the hour, or do you want to be paid per project? If you have an hourly or daily rate, you must get your client to agree to that rate in writing. Your customer will probably expect an estimate of amount of time involved. If you prefer to work on a project basis, you should give your customer a detailed quotation of what you are going to provide and how much it will cost. Do you expect your customers to pay a deposit before you start work? Do you want them to pay in stages, according to agreed project milestones? Is the work you are providing something that needs to be reviewed by the customer before it’s finalised, and if so, how many review cycles will you allow? How will you deal with additional requests from the customer during the course of the project? You should provide the answers to all these questions in your quotation document before you start work. Not only does this make the terms of your business relationship with your customer perfectly clear, it also makes you look like a seasoned professional. Best of all, it is a way of treating payment as a natural part of the business relationship, and it does away with any fear or embarrassment you might have felt.
- 6 Ways to Get Your Business Through the Tough Economy (thestartupmag.com)
- Why start-ups should strive to turn innovation into investment (thestartupmag.com)
- Sit Down With A Start Up, Leto Lab CEO Alex Berezovskiy (thestartupmag.com)